BUILDING A CULTURE OF SAFETY ]
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[ INSIDE
Fall 2015
Working Together: Tourism, First Nations and Forestry David & Goliath Need Each Other: Supply Chain Management in BC’s Forest Industry
PM # 40010419
Understanding the Impact of Bill C-45 on Logging Contractors
Fall 2015 Truck LoggerBC 1
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CONTENTS
FALL 2015 Volume 38 Number 3 www.tla.ca
37
46
Columns & Departments
Cover
7
Don Banasky
46 Working Together: Tourism, First Nations and Forestry
Leveling the Playing Field: Working Together, Sharing Risk and Fostering Innovation
Features
8
President’s Message
Speaking Out For Safety, Contract Changes & Innovation
Executive Director’s Message David Elstone
10 Interior Logging Association’s Message
Advocacy Success: Cab Guard Regulation Guidelines Updated Wayne Lintott
13 North West Loggers Association’s Message Winter Forecast: Slow Timber Harvesting Season Bill Sauer
15 Market Report
The Contractor Super-Cycle is on the Horizon Jim Girvan
16 Safety Report
A Culture Of Safety: Challenging to Build, Easy to Undermine Reynold Hert
18 Legal Report
Knowledge is Power: Understanding the 60 Day Compensation Window John Drayton
20 Business Matters
Investing in New Technology: Will the Long-Term Benefit Outweigh the Initial Investment? Chris Duncan
Cover photo: Nik West Photography, Courtesy of Interfor
By Brenda Martin
23 After the Beetle: Is There Opportunity? Jim Girvan & Murray Hall
31 The Timber Harvesting Contract and Subcontract Regulation: Is it Addressing Its Intended Objective? TLA Editorial
37 David & Goliath Need Each Other: Supply Chain Management in BC’s Forest Industry Robin Brunet
44 New Forestry Leaders: Susan Yurkovich and Jeffery Zweig Susan Yurkovich & Jeffery Zweig
50 Understanding the Impact of Bill C-45 on Logging Contractors Stephen Ross and Eric Ito
54 A Great Day: Golf Tournament and Barn Dance!
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The Truck Loggers Association 2015 Executive & Directors
Interior Logging Association 2015-2016 Board of Directors
Chairman Reid Hedlund Don Banasky First Vice Chairman Randy Spence Jacqui Beban Graham Lasure Second Vice Chairman Len Gudeit Past Chairman Ed Smith David Elstone Directors Lee Callow Ted Beutler Guido Claudepierre Howie McKamey Dennis Cook Dave McNaught John Drayton Lukas Olsen Randy Durante Clint Parcher Matt Edmondson Mark Ponting Frank Etchart Mike Richardson Scott Horovatin Barry Simpson Jeff Kineshanko Doug Sladey Hedley Larsen Matt Wealick Bill McDonald Adam Wunderlich Tim Menning Associate Directors George Lambert Ron Volansky Tim Lloyd General Manager Wayne Lintott Brian Mulvihill Administration Nancy Hesketh Adam Pruss Carl Sweet Editorial Board Don Banasky Interior Logging Association Jacqui Beban 3204 - 39th Avenue James Byrne Vernon, BC V1T 3C8 Graham Lasure Tel: 250.503.2199 Fax: 250.503.2250 Wayne Lintott E-mail: info@interiorlogging.org Brian Mulvihill Website: www.interiorlogging.org Bill Sauer
President Vice President Past President Executive Director Industrial Directors
CAMPBELL RIVER 207 - 1100 Island Highway, Campbell River, BC V9W 8C6 T: 250-287-0143 E: jpollock@aatrading.com
FALL 2015 / VOLUME 38 / NUMBER 3 Editor Brenda Martin Contributing Writers Don Banasky
Jacqui Beban Robin Brunet John Drayton Chris Duncan David Elstone Jim Girvan Murray Hall
Reynold Hert Eric Ito Wayne Lintott Brenda Martin Stephen Ross Bill Sauer Susan Yurkovich Jeffery Zweig
For editorial information, please contact the Truck Loggers Association: Tel: 604.684.4291 Email: trucklogger@tla.ca For advertising, please contact Advertising In Print: Tel: 604.681.1811 Email: info@advertisinginprint.com
Truck Loggers Association members know that a healthy forest means jobs and economic growth. As British Columbia’s leading benefits provider for 75 years, Pacific Blue Cross is a proud partner of the TLA in supporting workforce health and productivity.
Together we promote sustainable growth through healthy forests and healthy British Columbians.
Truck LoggerBC magazine is published four times a year by the Truck Loggers Association, with content and support from the Interior Logging Association and the North West Loggers Association. Its editorial content seeks to reflect issues facing the industry and to provide readers with current information on BC’s forest industry. All rights reserved.
Advertising Sales & Design Layout office:
Advertising In Print 200 - 896 Cambie Street, Vancouver, BC V6B 2P6 Tel: 604.681.1811. Fax: 604.681.0456 Publication Mailing Agreement No. 40010419. For subscriptions, contact office@tla.ca or 604.684.4291. Send change of address notices and covers of undeliverable copies to:
4 0678.002_truck_loggers_association(4.75x4.9375).sept.2015_JY.indd Truck LoggerBC Fall 2015
1
15-09-02 12:00 PM
The Truck Loggers Association Suite 725-815 West Hastings Street Vancouver, BC V6C 1B4 E-mail: contact@tla.ca
Tel: 604.684.4291 Fax: 604.684.7134 Website: www.tla.ca
from the Editorial Board DESK...
W
elcome to the fall edition of Truck LoggerBC. As we prepare for the fall push to get our volumes in by winter, let’s ensure we are doing so with a focus on safety and communication with all phases of our operations. Starting with safety, Reynold Hert, Chief Executive Officer at BC Forest Safety Council, talks about the importance of building a safety culture and how easily that culture can be accidentally undermined by company leaders. He leaves us with a powerful message about what real safety leadership looks like. Our Legal Report focuses on the FSP Compensation Fund. The TLA has worked tirelessly to get this fund in place but do you know how the rules work? The FSP Compensation Fund can pay contractors for a maximum of 60 days of unpaid work and there is a special formula within the Fund rules which dictates when the 60 days begin. John Drayton discusses the technicalities around the 60-day rule with on-the-ground examples. What is the market rate test? A decade into practice, we explore how it is being used, how it’s negatively affecting contractors and what needs to change. This article goes hand-in-hand with our supply chain article, “David & Goliath Need Each Other: Supply Chain Management in BC’s Forest Industry.” In it we discuss the supply chain and why it’s development is critical to the success of BC’s forest industry. The Interior feature article looks at the opportuni-
ties available after the mountain pine beetle. With the AAC being reduced, where are the opportunities going to be for Interior logging contractors? Ironically, with all the different industrial projects happening in BC right now, it may not be the forest industry. With all the new technology available, Chris Duncan discusses what a contractor needs to invest in new technology and new equipment in our Business Matters report. He also looks at financing options—both traditional bank financing and new partnership options. With new CEO’s leading COFI and TimberWest, we asked them to take a moment to introduce themselves to the broader forest industry. Here they tell us what they bring to the forest industry and what needs to change to ensure our industry is successful. As you all know, forest fires have been burning throughout our province this summer. I would like to thank everyone involved in fighting these fires. As always, we hope you enjoy our magazine and find it informative. If you have any feedback or comments, pleases contact Brenda Martin, Director of Communications, at 604.684.4291 ext. 2 and brenda@tla.ca.
Jacqui Beban, Nootka Sound Timber Co. Ltd Editorial Board Chair
Level Three First Aid Training Apply now! Up to 12 candidates can receive reimbursement for their
OFA3 registration fee and a bursary of $1,000 in additional financial support upon the successful completion of the course. This funding for level three first aid training is meant to affect safety on-the-ground by increasing the number of first aid attendants in the woods. Make safety a priority in your business. Take part today!
For more information or to apply, visit www.tla.ca/FirstAid
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Don Banasky
TLA President’s MESSAGE
Speaking Out For Safety, Contract Changes & Innovation
M
y heartfelt condolences go out to the families, friends and communities of our fallen colleagues. We have witnessed a spike in industry fatalities this summer and we must take a moment to remember these individuals—who they were and what they meant to our forestry community. These tragedies should be front and centre in all of our crew discussions as we go back to work after a long, dry summer. Although complete details of each incident have not been released as I write, we need to acknowledge our fallen colleagues’ sacrifice and create change in our industry once and for all. Paperwork, courses, meetings and regulations are all there to help us build a workplace with no injuries or fatalities. But it is a boots-on-the-ground culture shift that is going to get us there. THIS STARTS WITH YOU! Develop the courage to speak up and be heard. You must lead by example, ask questions and take the extra time to ensure you and your co-workers are clear of any danger at all times. We should all be “standing in the gap” for safety and life. “Standing in the Gap” is an exceptional safety presentation I took part in while touring New Zealand in 2013. This inspirational and heartwarming presentation was presented at Forest Industry Contractors Association’s annual safety convention and trade show in Rotorua. I have become good friends with the presenters—husband and wife team Wiremu Lee and Marsella Edmonds—over the last couple of years. They will be presenting at our 2016 TLA convention and trade show in January at the Westin Bayshore. The Edmonds family experienced the loss of their son, Robert, in a falling accident. This honest presentation is one you can’t miss. Please plan for your owners, managers and employees to attend. I believe the Edmonds’ message will both hit home and give us a different perspective on keeping our people safe in the field. With their Maori heritage and amazing strength, I know
Wiremu Lee and Marsella’s presentation will resonate with BC’s forest industry, as it has in New Zealand with impressive results. This summer, when a passerby said, “Isn’t this sunny weather incredible?” your answer may have been a little unexpected. Maybe you politely agreed. But if your inside voice got going, maybe you talked about how much the weather is negatively impacting your life and business. No revenue, no pay cheques. A work load that’s piling up and adding additional stress to your fall operations. Deadlines flying by or looming in the background. This year’s “summer that never ended” has had quite the historic impact on BC’s forests and on the loggers sitting at home as a result of prolonged record temperatures that ended in record rainfall. Dealing with extremes is the nature of the business, that’s what. As we move into our busy time after such a hot dry summer, contractors need to look directly at the financial side of the business with safety leading the way. As business-minded individuals, we may look at the months lost to hot weather as a positive shift to an increased demand for volume to be harvested. So the main message here is simple. Get a handle on your costs and don’t under sell your services. Remember, a true safety program costs money, however it will ensure workers have the best opportunity to return home safe every day and save you money at the end of the day. Don’t base your bid, or productivity, on what you can do yourself. And, finally, remember to Say No if the deal is wrong for any reason. There is plenty of wood out there to harvest and making the wrong deal or being afraid to say no doesn’t help anyone, including you!
Here are a few things that consistently change in the field and are sometimes missed in contract modification: • utilization/spec changes • additional bush sorting • weather/time of year of harvest due to extended fire season • change in trucking destinations • increased or decreased delivery demands If you see these demands or changes, please take the time to identify their impact and work with the licensee to recognize the additional costs, with contract amendments. The contractor community is not stuck in old thinking and wants to be successful over the long haul. Your TLA has heard this and, as a result, we have taken steps to work with the Coast Forest Products Association (CFPA), licensees and FPInnovations on like-minded issues. We understand that our industry needs to evolve in many areas, including technology and government regulation. I would like to thank the CFPA and other participants for agreeing to work together to identify areas where we can increase our competitiveness both as contractors and as an industry. Your TLA and its Board of Directors will maintain our push on rate issues. However, we are stepping outside the box as well. I believe this is our industry putting our best foot forward to ensure business success for loggers and BC’s forest sector as a whole within the global marketplace. Finally, please remember to have the confidence to speak out for safety, contract changes, innovation and always understand the Power of NO. Don Banasky, President, TLA Tel: 250.668.7746 Email: don.banasky@thedormangroup.ca
Fall 2015 Truck LoggerBC 7
David Elstone
TLA Executive Director’s MESSAGE
Leveling the Playing Field: Working Together, Sharing Risk and Fostering Innovation “Logging contractors always complain about rates.” If that is what you believe, you are clearly not in tune with contractor concerns. Please read on.
W
hen I hear people comment that “contractors having nothing good to say,” I am reminded that the current relationship between the majors and logging contractors (and, by extension, the TLA) is frequently generalized as confrontational. However, I know for a fact that contractors don’t want this type of relationship. Indeed, rates are often a point of friction. But it is a symptom of a bigger challenge—the lack of fair and respectful relationships between some licensees and some contractors. Contractor sustainability in itself has many different aspects. In this issue, we take a look at the coastal forest industry supply chain in “David & Goliath Need Each Other: Supply Chain Management in BC’s Forest Industry.” I think many would agree that our coastal industry is in dire need of a collaborative supply chain to re-invigorate made-in-BC innovation. However, contractors are concerned about the basic survival of their businesses and so it is not surprising that endeavours conducive to a more efficient and sophisticated supply chain have not occurred. A cultural shift is required. As Garland Chow, Associate Professor, Logistics and Supply Chain Management in the Sauder School of Business says in the article, “It’s more than coordination and cooperation. It’s recognizing that the contribution of all the participants in the supply chain are valuable, and this results in more joint decision-making, for example between the logging contractors and the forestry firms.” The degree of change facing our industry appears to be increasing with shifting markets, global competitiveness, fibre supply reductions in the BC Interior, environmental pressures, safety concerns and a potential new era in land ownership. We truly have little influence on these variables. CEOs in tough times often say their strategy is to control what
8 Truck LoggerBC Fall 2015
they can so their company can withstand all those variables or business risks they can’t control. A willingness to engage to address contractor sustainability is one variable that can be managed and—in my humble opinion—would make a company and its supply chain stronger.
risk and fosters innovation, we can reinforce what really is important in our business relationships. As a collective voice of contractors and, increasingly, other independent businesses of the coastal BC forest industry, the TLA works to address a broad spec-
Our coastal industry is in dire need of a collaborative supply chain. In fact, there are examples of that willingness in some of BC’s forestry relationships. The cover story in our last issue, “Goliath, No That’s the Other Guy: Building Partnerships in the Forest Industry,” highlighted six successful relationships where there was a real partnership—a give and take that allowed both parties to prosper and reinvest. By way of example, these companies that were featured can’t rely on size as a way to strengthen their supply chain. Rather an understanding of each partners’ needs was the common thread that enhanced their businesses. It’s also key to remember that it is not just major licensees and contractors who should be at the table to change the relationship dynamic. The end goal is to level the playing field and our provincial government is the referee. The Timber Harvesting Contract and Subcontract Regulation (aka Bill 13) and its fair market rate test—which is featured in another article in this issue—has tremendous influence over supply chain relationships. Given that Bill 13 is ten years old in its current version, it is time to update this important legislation that shapes our industry. In every crisis there is opportunity. I see a tremendous upside if our sector can manage this culture shift. In investor lingo, it is the low hanging fruit that can improve returns. By building a supply chain that works together, shares
trum of forestry issues on the behalf of its members. Contractor sustainability— ensuring contractors get a return on their investment that allows them to re-invest in their companies and communities—is a huge concern shared by many and not just contractors. As noted in President Banasky’s message on the previous page, the TLA and the Coast Forest Products Association (CFPA) are working behind the scenes to find ways to improve contractor/licensee relationships. I hope by the convention in January we will be able to show some progress on this file. The world is changing around us and as an industry we can’t afford to delay this issue perpetually. Something must change and hopefully we make that change a positive one. Contractors themselves also have the ability to enact change. Contact me to find out how or to share your concerns and ideas. Remember, I can’t act in your best interest if I don’t hear what those interests actually are. Furthermore, if you believe in the TLA, encourage those that sit on the sidelines to show their support by becoming a TLA member. David Elstone, RPF, Executive Director, TLA Tel: 604.684.4291 ext. 1 Email: david@tla.ca
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Wayne Lintott
Interior Logging Association’s MESSAGE
Advocacy Success: Cab Guard Regulation Guidelines Updated
O
ver the course of a year, the Interior Logging Association (ILA) represents our membership on various committees, on conference calls and in general meetings addressing the concerns facing the harvesting sector of our industry. We advocate for our members to ensure their voice is heard and that they have a role in shaping policy. One of our advocacy focuses this year has been cab guards on logging trucks. I’m happy to report that this advocacy effort came to a successful conclusion late this summer. The meeting was organized by WorkSafeBC and took place at their headquarters in Richmond. The focus was logging truck cab guard regulations. Attending the meeting were representatives from the cab guard manufacturing companies, BC’s logging associations, BC Forest Safety Council, licensees, United Steel Workers and several WorkSafeBC staff. Here’s the background information. The regulation (G26.65 Determining cab guard compliance) states that for the protection of the driver of a log transporter, the log transporter must have a cab guard that meets certain requirements. The main regulation of concern was 2(a) which states that the cab guard must be at least 15 cm (6 in) higher than the cab.
Over the past few years, truck manufacturers have changed the designs of their truck cabs and some are no longer manufacturing a flat roof cab. This has created a major problem as the new cabs now have a sloped aerodynamic design. This gives them an upward slope from the front of the cab to the back of approximately four inches. This slope has reduced the height of the cab guard to approximately two inches above the cab which made those cab guards noncompliant with the existing regulation. The meeting allowed for full participation by all and in the end it was agreed that a solution would be to apply the following for most log transporters. The interior ceiling immediately above the driver may be used to determine cab height or, in the case of some log transporters, the top of the windshield will be an acceptable measure of cab height. All cab guards must be 15 cm (6 in) above this point of measurement. WorkSafeBC then consulted with various stakeholders over the next few weeks and then drafted a new guideline for complying to cab guard regulation which includes the new point of measurement explained above. I would like to congratulate WorkSafeBC on its responsiveness to this issue. It was a major concern for
Diagrams: Courtesy of WorkSafeBC
Diagram 2: Interior ceiling cab measure These diagrams illustrate how the updating of G26.65 affects cab guard compliance. 10 Truck LoggerBC Fall 2015
all log transporters in the province, even to the point of curtailing some log hauling by truckers. The action for a quick solution was immediate and saved the industry thousands of dollars by not having to purchase new cab guards at approximately $7,000 per truck. Having attended many meetings over my time with the ILA, I would like to say that this was one of the most interesting and responsive meetings I have attended. Congratulations to all who participated. For further information please contact Wayne Lintott at 250.503.2199 or wayne@interiorlogging.org. You can also visit WorkSafeBC website (www.worksafebc.com) and search for “G26.65” to read the full regulation.
Diagram 1: Traditional cab measure
Diagram 3: Windshield cab measure
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• cable and ground-based logging • road building • dry land sorting • engineering
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Don Banasky 250-668-7746 don.banasky@thedormangroup.ca
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Tamihi Logging Co. Ltd. || Phone: 604-796-0314 || Fax: 604-796-0318 || 14250 Morris Valley Rd., Harrison Mills, BC Dorman Group || Phone: 1-250-741-1993 || Fax: 250-741-0012 || 2496 Pirart Rd., Nanaimo, BC
12 Truck LoggerBC Fall 2015
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Bill Sauer
North West Loggers Association’s MESSAGE
Winter Forecast: Slow Timber Harvesting Season
I
’ll start with an update on the happenings in BC’s northwest. Forest harvesting in the area has almost ground to a halt. The export market to Asia has ground to a halt. Most of our pulp wood was going to Howe Sound Pulp and Paper and they have a huge amount of inventory on hand due to the recent permanent closure of their newsprint machine. According to predictions no fibre from our area will be required until next year.
and in the United States. We had a hot dry start to our summer resulting in not only fires in the Interior but also on the coast. In the northwest of the province it was the driest summer in memory and there was even a small forest fire near Port Edward. Locals recall this as a first for the region. Pine forests need fire to regenerate and, unless they threaten people or property, the current strategy has been to let those fires burn out naturally. The beetle-killed
There has never been so much lumber from Smithers and Houston sitting at the port in Prince Rupert. The ex-West Fraser sawmill in Terrace, purchased by a Chinese company still remains closed after two months. However, they have recently started to harvest their tenure but it’s being shipped directly to Prince Rupert. I’m told there has never been so much lumber from Smithers and Houston sitting at the port in Prince Rupert waiting for shipment. (Note: Just before Truck LoggerBC went to print, Skeena Sawmills announced it will be reopening. Mill official Roger Keery said that full production should be kicking in the last week of September.) That said, most signs still point to a very slow harvesting season this winter. Switching gears, this summer was a challenge in my neck of the woods. Standing on my deck viewing Shuswap Lake during this past summer a smoky haze was everywhere—at times so bad I was unable to see across the lake. Looking upward, one could see the sun attempting to make a brilliant appearance; however, it became a red ball in the sky. Although I have never been to China, the view is reminiscent of many pictures I have seen of the pollution in their urban areas. Our problem was not pollution but smoke from forest fires, both here in BC
pine forests in the BC Interior provided ample fuel for fires. After the fire season is over for the year, the Ministry reviews the damage and impact on our forests and begins assessing which areas should be replanted and which areas should be left to regenerate themselves. I thought that it would be interesting to research the amount of fires caused by lightning versus those started by human carelessness and ignorance. Although these come in various forms, I view carelessness as not completely putting out a campfire and having it erupt after one has left. Ignorance on the other hand is starting a campfire during campfire bans or tossing lit cigarette butts out of your vehicle. According to the Ministry of Forests, Lands and Natural Resource Operations website, the current 10-year average, taken from 2004-2013, is 1,847 fires. Of these, 38.5 per cent (or 712) were people caused and 61.5 per cent (or 1,135) were caused by lightning. Given that the average cost to fight these fires was $145.5 million, the 39 per cent people caused fires cost the taxpayer around $57 million. Possibly more education or heavier fines are ways to reduce these costs.
At the time of writing, the threat of new major fires is rapidly diminishing as the nights cool off and the moisture content in the air increases. Even with the early start to the fire season we just exceeded last years’ mid-August spending levels. To date passing the $200 million mark. The individual number of fires is higher, largely attributed to the many lightning storms this year. Our most expensive year fighting fires was 2003, where the province spent in excess of $400 million. That was the year of the McLure and Barriere fires. The costs only include the cost of fighting the fires and do not include the millions of dollars of lost property that occur with urban interface fires along with the human emotional toll. A lot has been done in BC to mitigate the damage created by urban interface fires, especially in the wake of the devastating McLure and Barriere fires. Funding is available for communities to develop a wildfire protection plan. This program provides funding to communities to define and analyze the risks. Implement plans that recommend fuel modification projects and prioritize treatment areas among a number of other incentives. A few additional items that could possibly be added to the program are funding for education for homeowners to develop their own wildfire protection plan around their individual properties as well as an incentive for a reduction in house insurance premiums if a successful plan were developed. Hopefully, the next haze that fills the air is the exhaust smoke from the harvesting equipment and logging trucks going to work and not the smoke from more of our beautiful BC forests burning.
Fall 2015 Truck LoggerBC 13
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Market REPORT
The Contractor Super-Cycle IS On THE HORIZON Death and Taxes. These are generally the two concepts that most will agree we cannot avoid.
B
ut since we work in a commodity driven industry that is subject to the ups and downs of markets, the fundamental law of supply and demand is a third concept we cannot avoid since it drives all of our behaviours. The law of supply and demand is not an actual law, but it is a well confirmed and understood realization that if you have a lot of one item, the price for that item should go down. At the same time you need to understand the interaction—even if you have a high supply, if the demand is also high, the price could be high too. In the world of investing, the law of supply and demand can contribute to explaining a stock’s price at any given time. In a contractor’s world, too many contractors and too little work is a recipe for pricing behaviour that is unpalatable. In 2009, we saw this law take hold and we all witnessed the devastating impacts it had on the forest products industry. US housing starts hit an all-time low and the demand for lumber fell like a rock. The Random Lengths Framing Lumber Composite Index followed suit and fell from $387 per thousand board feet in 2005 to $222 in 2009 despite massive sawmill closures and curtailments globally at the low point in the recession. The law of supply and demand nipped a whopping 43 per cent off the price of lumber. The reverse application of these laws of supply and demand show up in the long awaited lumber “super-cycle” that was forecast to generate historically high lumber prices, as the so-called “stars aligned.” Forecasters have indicated continued growth in US housing and Chinese lumber markets and the decline of production for the BC Interior and other Canadian regions. With rising demand for lumber in the face of falling supply, the “law” suggested higher prices. The super-cycle may still be just around the corner (but don’t hold your breath). As logging contractors, these laws of economics can also apply and, in fact, may
be concepts we should all take more seriously in our day-to-day thinking. Looking forward, the demand for workers and contractors is forecast to rise dramatically in BC as new demand comes online. Pacific NorthWest LNG, which is controlled by Malaysian energy giant Petronas, announced recently that it is close to confirming a final investment decision on the $36 billion project in northeastern BC and, at the time of writing, the BC legislature had confirmed in law the legal framework to support them. If built, then up to 4,500 jobs will be created at the peak of construction, plus 330 new, longterm careers operating the facility in the community and up to 330 more long-term careers in the region. In July, the British Columbia government granted approval for the first phase of construction to start on the massive Site C hydroelectric dam project on the Peace River. Construction of the almost $9-billion project is touted to require another 10,000 workers that may very well be needed when Petronas also requires their 4,000 workers. Could the stars be aligning for contractors?
tractors across BC? Over the past year we have seen many contractors exit the industry as a result of low returns and few have chosen to enter the business for the same reasons. The majors continue pressing their agenda of rate reductions and lack of acknowledgement of costs. So, as contractors and workers age, it is safe to say more will leave the sector in the coming years. It is also safe to say that some contractors will look for more cooperative business partners as these new work opportunities around the province start to materialize. Employers who can afford to pay the rates that support investment in equipment and human resources will attract contractors that are paid a rate of return that justifies the investment and risk they take on. It is certain that the supply of logging contractors is not increasing and going forward, there will be rising pressure for it to decrease. Managing log supply on a quarter-to-quarter focus will surely catch some sawmills (and their investors) by surprise when they wake up to this potential future reality. Less logging contractors in the business and growing demand for them from the
We have already witnessed severe competition for workers in BC’s northeast. According to IUOE News, the official publication of the International Union of Operating Engineers Local 115; along with the other potential LNG projects, Northern Gateway and the Kinder Morgan pipelines (which are still on the table), the combined demand for workers in BC could be as high as 100,000 with decades of employment opportunities on the horizon. In fact, we have already witnessed the severe competition for workers in the northeast of the province, in towns like Chetwynd. So how does this impact logging con-
lumber super-cycle and the law of supply and demand will naturally kick in. So whether you stay logging or choose to seek your fortunes in other sectors, we hazard the comment that the contractor super-cycle is on the horizon.
Fall 2015 Truck LoggerBC 15
Reynold Hert
Safety REPORT
A Culture Of Safety: Challenging to Build, Easy to Undermine
F
ollowing an injury-causing incident, owners/heads of companies often ask: “Why did that person think what they did was the right thing to do? Don’t they know that safety is first here and they have the right to refuse unsafe work?” There can be frustration that posted policies, safety meetings, and a genuine culture of caring for people has insufficient impact on a high number of injuries. The best companies at reducing injuries have realized that it’s not what you see in the big meetings or on the poster on the wall, it’s how leaders and owners handle themselves on the small things dozens of times a day, day after day that really sets the way things are done. Statistically, 95 per cent of incidents are caused
16 Truck LoggerBC Fall 2015
by human behaviour and 85 per cent of that behaviour is caused by what people believe leadership wants as signaled by their everyday actions. An example: a faller may know that he has the right to refuse unsafe work. However, when a faller asks for a danger tree to be blasted and he hears back: “Really? That’s a pain. It will take time. Maybe I should get another faller…but if you really insist…then I’ll see what I can do.” Then the reality of the faller’s world is you get rewarded for taking the risk, not stopping the work. The supervisor may take that position because in their world, their manager asks if the volume required for the week is going to be ready, without ever discussing if getting the volume is putting anyone at
risk. The manager may know that safety is first in the company, but if the manager’s measures don’t include progress on injury reduction, but are heavy on cost and volume, then their reality is cost and volume. The challenge is that the messaging is subtle. Consider “you have the right to refuse unsafe work” and “you have an obligation to refuse unsafe work.” One implies you have the right, but better be ready to prove it. While the other implies you need to stop when you or others are at risk to take the right steps to get the job done without injury. There is a difference too in what it means management will do. To a lot of people “right to refuse unsafe work” means management will question if it was the right
call, while “obligation to refuse unsafe work” means management will back you up, and be upset if you don’t. If leaders respond by questioning the call—the policy is really “right to refuse, but be questioned.” But when leaders back it up and support the stoppage, the reality is “obligation to refuse and solve the issue before injury”.
three point contact; why didn’t she use the working alone procedure; why did he operate when he wasn’t trained?” In a surprising number of investigations, the reason given is because people “know” that the standards are “really guidelines” and if you have been around for a bit, you can use them or not. This is often shocking to the owner/leader, but
Consider the difference: “you have the right to refuse unsafe work” or “you have an obligation to refuse unsafe work.” Owners and leaders send signals all the time through their small actions. Do they use three point contact, do they follow the “Keep 100 meters away” from equipment that has it painted on, do they use their PPE (personal protective equipment), do they work with the crew on redoing the plan and communicating it well when something changes, do they drive recklessly with other people in their own vehicle? An issue for many owners and leaders has been where an incident has occurred when an employee has not followed a set standard. “Why didn’t he use
what comes next is even more shocking. People say they believe this based on the behaviour of the owner or leader or their supervision. This belief comes from small actions they have seen. The owner may regularly pull front forward into a parking space when the policy is to back in, “because he is just there for a minute.” The owner may have asked an untrained person to run a loader for a short time, but it was OK “while he was there.” The owner may have commented he got the pilot to fly “when the weather was poor.” The unfortunate part is that once
people understand that standards “aren’t standards” but actually guidelines that can be bent to get things done, then a serious incident can occur in something unrelated to what the owner/leader does. For example, the standard may be to lock out mobile equipment. But a person believes that if it is just for a minute, they can get under the truck without locking it out. (This recently resulted in a fatality in a trucking company when someone drove the truck away.) Literally hundreds of substandard actions can result from people acting as they “believe” leadership would want them to act, based on a relatively small number of actions of leadership violating their own policies. If you create standards, stand by them, always, through every action. After all, what is culture? It is the practices people do based on what they believe leadership actually wants shown by the values leadership demonstrates through their own actions. Reynold Hert is the CEO of the BC Forest Safety Council.
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Don’t wait for a real emergency to find out if your response plan works. View the emergency response plan video at worksafebc.com/forestry. Fall 2015 Truck LoggerBC 17
John Drayton
Legal REPORT
Knowledge is Power: Understanding the 60 Day Compensation Window
T
he Forestry Service Providers Compensation Fund, created to financially support a contractor when a licensee is insolvent and unable to pay its bills, can only pay the contractor for a maximum of 60 days of unpaid work. Critically, the contractor doesn’t choose which 60 days. There is a special formula within the Fund rules which dictates when the 60 days begins. All contractors need to know how this rule works and how it should affect their actions toward a licensee that pays late or only makes partial payments. Here’s the formula. To begin, one needs to identify the first date of nonpayment to the contractor. In a typical case, a contactor may have a two week delivery window that ends in a cut-off, and payment is to be made one week later. If payment is not made, then the first date of nonpayment is established. From there, the contractor reaches back to that first day in the delivery window, and that establishes the start date for compensation. Then, one counts forward up to a maximum of 60 days. The concept is that immediately on non-payment the contractor should get a bit of time to catch his breath, and then he should be moving towards an orderly shutdown of operations with this licensee. Experience tells me that the situation is rarely cut and dried. Consider these two real life scenarios.
Scenario One
In this first scenario, the contractor started off performing road work as promised and then began some harvesting and delivery of timber. When his first cheque was due, only a part payment was made along with a promise of a catch-up when cash flow improved. The contractor continued and more partial payments were made. This cycle repeated itself for a few months, until the licensee became insolvent and the contractor stopped working. In this scenario, the first date of non-payment was
18 Truck LoggerBC Fall 2015
established early on, as was the start date for calculating the claim. For the 60 days of work following that start date, the contractor had actually been paid. He had been paid in bits and pieces and almost always late, but he had been paid for the 60 days of work. He was ineligible for compensation for his later work, because that first day of non-payment was then months old.
Scenario Two
In my second scenario, a contractor was directed to send some timber into the sort yard of a small licensee, where it was to be held for export to China. Other timber was directed to a local sawmill and other timber was directed to a nearby pulp mill. The contractor received direct payment from the sawmill and direct payment from the pulp mill, but he received only a promise of later payment for the export timber. The contractor continued working on this basis for 120 days. Then he was left with a big receivable for the timber in the sortyard. He applied to the Fund and was initially told, “Your first date of non-payment was long ago and we will calculate your 60 day eligibility window from then. The direct payments that you received from the sawmill and the pulpmill—including those for deliveries in the final months—will be first applied against the earliest work that you performed. You have been fully paid for your first 60 days of work, and you are entitled to nothing from the Fund.” (Fortunately, the Fund changed its position. In this case, the contractor was only about 15 per cent unpaid when his first payment was expected, and the Fund accepted that the contractor was acting reasonably in not immediately shutting down. Partial compensation was received from the Fund.) These two scenarios highlight one of the vaguer points within the Fund’s application rules: there is uncertainty over the meaning of the words “the first non-pay-
ment of an invoice.” Is that the first ever failure of the licensee to pay on time, even if late payment is ultimately made? Or, is it the oldest unpaid invoice when the application to the Fund is made? Further still, if a contractor pursues his legal remedies under the statute and manages to collect some money, is all of that money going to pay the oldest invoices, leaving the latest invoices unpaid? If that’s the case, then all of this effort will lessen the contractor’s compensation claim. A contractor faced with a non-paying or late-paying licensee needs to make a calculated decision on whether to continue onward, or to slow down, or to stop. The contractor also needs to decide whether to exercise his lien rights under the statute. There are many business factors coming into play in making these decisions, only one of which is the likelihood of licensee insolvency and a possible application to the Fund. Contractors need to be aware that when it comes to an application to the Fund, the contractor doesn’t select the 60 day period of compensation that best suits his needs. That 60 days has already been determined by the rules of the Fund. Not only that, the more that the contractor continues to work after the first non-payment, with more late and partial payments coming in, the more the contractor is jeopardizing his entitlement to compensation from the Fund. John Drayton is a Kamloops lawyer practicing in the areas of forestry and motor transport law.
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Chris Duncan
Business MATTERS
Investing in New Technology: Will the Long-Term Benefit Outweigh the Initial Investment? During his welcome address at the Minister’s Breakfast this past June, the new CEO of Timberwest Jeffery Zweig spoke about contractors using decade old machinery; commenting “technology has moved on and we have not.” This raises an interesting point. For a business to be successful, specific needs and results must be addressed and it must be capable of investing in new technology. What does it take to support investment in new technology? Who can afford to invest in new technology? How can the investment in new technology be financed and what are the banks looking for?
What does it take to support investment in new technology?
In an industry that is focused heavily on
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managing costs to improve profitability it can be tempting to stay with existing technology, but the reality is investing in new technologies can actually save you money in the long term. The first factor to consider when investing in technology is access to capital. Only companies with strong balance sheets and access to capital will be able to support investment in technology. Without this capital, many businesses must keep doing the same thing with the same end results. Technology can help to change these results, but only if you have the resources to invest. Another factor is the commitment it takes to implement the new technologies. People will need to support changing their practices to conform to the way the new
technologies work. Operators will need to learn the way the new technology affects day-to-day operations. Mechanics will need to learn how to work on the equipment; gone will be the days of using a hammer to fix a problem, instead a laptop may be the tool of choice. Contractors alone cannot bear the costs (and risks) of investing in new technology. The provincial government needs to align policy and regulations to help contractors invest in and use new technology. Licensees need to partner with their contractors and align goals while allowing them the stability to make changes. Only by working together can all the players propel the coastal industry into the next generation of technology.
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Who can afford to invest in new technology?
Financially speaking only contractors that have strong earnings, savings in the bank and good financing in place are able to invest in technology. Along with financing, contractors need to have confidence that they will have an opportunity to have long-term profitable work before they invest. Why invest if the technology could possibly sit idle for months on end while you search for new work? The other factor is only contractors that have leaders with vision will invest in new technology, if management is happy with the status quo, they won’t see the need to invest. Business people make decisions based on returns. If you are not going to earn more by investing in technology than keeping your money in the bank, why invest? The return on investment may come in many forms from reduced labour costs, safer working environment, greater production, staying competitive and more.
Why should you invest in technology?
Technology can increase the safety of employees by placing them in operator roles where the task would have been
more direct labour intensive with the older technology. For example, remote control technology can move employees out of harm’s way where they can operate equipment from a distance. Equipment monitoring technology can warn operators when set limits are breached, before a serious accident occurs. Technology can help to monitor efficiency and allow contractors to know where improvements can be made to reduce inefficiencies and increase profits. This data can also help support rates when it comes time to negotiate with customers. Another factor to consider when deciding to invest in technology is staying on top of the competition. You have two choices: Be the frontrunner using new innovative technology or fall behind the pack. Being the leader will have its ups and downs as the learning cycle with new technology is experienced, but do you really want to be the last person using the old technology?
earnings and cash flow and a good relationship with its banker. Another option is partnerships between contractors and the licensees, where the licensee will help to facilitate the investment in the new technology. This may be the option we see as the coastal forest industry moves into the next generation of technology. With new technology comes new ideas and of course some important considerations. If you believe that your company will benefit in the long term by investing in new technology, now may be the time to take the plunge. Chris Duncan, CPA, CA is a Forestry Services Business Advisor for MNP LLP. Tel: 250.748.3761 Email: chris.duncan@mnp.ca
How can the investment in new technology be financed?
One option to finance new technology is through traditional bank financing. This method requires a company with strong
Fall 2015 Truck LoggerBC 21
22 Truck LoggerBC Fall 2015
After the Beetle: Is TheRE Opportunity? By Jim Girvan & Murray Hall
I
n March of 2010, the International Wood Markets Group, together with the support of the authors, released a ground breaking forecast for the BC Interior forest industry after the beetle1. In it, the authors forecast that: “Sawlog shortages caused by the mountain pine beetle could trigger the permanent closure of about 16 large primary sawmills and/or plywood production facilities within the BC Interior by 2018.” As of today, 13 mills have closed and if the most recent analysis of sawlog supply and demand holds, the 2010 prediction of 16 mill closures may end up being optimistic. The release of the Merritt Timber Supply Area (TSA) Timber Supply
Analysis Public Discussion Paper2 in July of this year may be the catalyst for additional mill closures and marks the beginning of what is sure to be a tumultuous time for the post-beetle BC Interior forest industry. However, the narrow spread between the allowable annual cut (AAC) and the actual harvest of the Merritt TSA suggests that this area is an anomaly within the wider Kamloops Okanagan Region and the BC Interior in general. We tend to focus on the news headlines that talk about AAC reductions but the reality on the ground is that for much of the BC Interior, the pain has already occurred as actual harvest levels have already decreased over the last few years.
A Closer Look at Merritt TSA
The British Columbia Ministry of Forests, Lands and Natural Resource Operations (FLNR) regularly reviews the timber supply for all TSAs and Tree Farm Licences (TFLs) in the province. This review, the fifth for the Merritt TSA, examines the impacts of current legal requirements and demonstrated forest management practices on the timber supply, economy, environment and social conditions of the local area and province. Based on this review, the province’s Chief Forester will determine a new allowable annual cut (AAC) for the Merritt TSA. The Merritt TSA is one of many areas hard hit by the beetle and like
Photo: iStock
Fall 2015 Truck LoggerBC 23
Photo: iStock
many BC Interior TSAs, had its AAC increased to promote the salvage of dead timber while it could still be used to make forest products.
Agreements, in 2005 the AAC was increased to 2.8 million cubic metres to address the mountain pine beetle epidemic. By 2010, the beetle epidemic had
In 2014, while the AAC was approximately 60 million cubic metres, the log harvest in the same year was only about 45 million or 75 per cent of the AAC. The pre-beetle AAC for Merritt was about 1.5 million cubic metres. Following a number of changes to the AAC to address fire salvage, small pine harvest and Innovative Forest Practices
peaked and the volume of beetle-killed pine was decreasing. As a result, the provincial Chief Forester decreased the AAC slightly to 2.4 million cubic metres. But as indicated in the public discus-
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sion paper, the new analysis suggests a reduction in the AAC to a level of between 1.16 and 2.0 million cubic metres, depending on the assumptions made. That is a 400,000 (17 per cent) to 1.2 million cubic metre (52 per cent) reduction in cut. However, the 2013 and 2014 actual harvest in the Merritt TSA was approximately 2.3 million cubic metres or 96 per cent of the current AAC. Unlike other mountain pine beetle impacted TSAs, Merritt has had a high level of harvest relative to the AAC given that it provides a log supply to the forest industry both within the Merritt TSA and
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beyond, including sawmills in adjacent regions including the West Kootenay and the coast. As a result, demand for logs harvested was virtually the entire AAC.
Impacts on the Broader Interior Region
For the larger Kamloops Okanagan Region, the regional AAC is approximately 11.3 million cubic metres. This includes the Merritt, Kamloops, Okanagan and Lillooet TSAs, regional TFLs, woodlots, community forests and private contributions to the log supply, In 2014, the regional harvest was only
9.7 million (87 per cent) or 1.6 million cubic metres less than the AAC. This lost harvest opportunity was due in part to the difficult economics of salvaging long since dead pine and a significant reduction in demand for logs as a result of mill closures. A similar story is seen when looking at the BC Interior as a whole where the currently available AAC is also not being fully harvested. The figure (see page 26) depicts the historic total volume harvested (in orange) together with the current forecast for the BC Interior AAC (blue line) based on the most current analysis and
assumptions made by the authors. As can be seen in 2014, while the AAC (including traditional contributions from private harvests) was approximately 60 million cubic metres, the coniferous log harvest in the same year was only about 44 million (45 million when including deciduous harvest), or 75 per cent of the AAC. Some of this shortfall, however, reflects the undercut in areas such as Fort Nelson where there is an available AAC, but no industry to consume it. As a result, the AAC went unharvested. Looking forward, the BC Interior AAC is forecast to fall to just over 40 million
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cubic metres in the mid-term, a 33 per cent reduction from the current level.
to reduced work opportunity since as indicated above, a large portion of the
In 2014, the regional harvest for the Kamloops Okanagan Region was only 87 per cent of the AAC. The coniferous sawlog component of the AAC (green bars in figure above) which supports sawmills and rotary mills across the BC Interior is forecast to be about 35 million cubic metres. The difference between the total AAC and the sawlog supply reflects harvest used for deciduous consuming plants, and non-saw logs used for pulp or biomass consumers. At the same time, the posted schedule for TSA reviews suggests as many as eight TSAs will have their AACs reviewed and likely reduced within the next two years.
What This Means For Contract Loggers Despite the dire news headlines of falling AACs, for contract loggers what is important is that the forecast reductions in AAC are not directly correlated
26 Truck LoggerBC Fall 2015
forecast AAC reductions are simply not being harvested today. If the entire mid-term AAC of 40 million cubic metres is harvested to provide sawlogs, pulp logs and deciduous logs to BC Interior mills, the forecast of actual harvest reduction is only a mere 12 per cent when compared to the actual 2014 harvest of 45 million cubic metres for the same area. While still not a good news story, the future of the BC Interior is not as bad as the AAC reduction forecasts alone suggest! As AAC reductions occur, so too do changes in the apportionment of the AAC to various harvest tenures contractors operate on. Temporary tenures are the first to be eliminated, generally not being replaced as they expire. This has been seen extensively across the BC Interior already. And, when the AAC falls below the pre-beetle level, replace-
able tenures are then typically reduced proportionally across each TSA. But what about places where there still may be opportunity for contract loggers? Two areas may provide new opportunity for some. As indicated above, the first is Fort Nelson. With an AAC of 1.625 million cubic metres in the Fort Nelson TSA and essentially no forest industry consumers for the coniferous or deciduous logs within the area, opportunity may be possible. The difficult economics of operating in this area are highlighted, however, on the Northern Rockies Regional Municipal Council website in, Wood Products Business Case Options For The Fort Nelson Area, a report authored by Woodmarkets3. Should markets improve, however, the wood is there for use. The area west of the Bulkley Valley is another area of the province where a chronic shortage of industry log demand keeps an otherwise available AAC from being harvested. Like Fort Nelson, however, the West Prince Rupert Region also has its economic challenges. The area has an aggregated AAC of about
3.6 million cubic metres, but in 2014 the harvest was only 1.3 million or 36 per cent of the allowable. That said, the difficulty in operating in this area is slowly being overcome by some.
or to overseas consumers. Regardless of the level of harvest, the opportunity for more exists and we are sure many investors are looking at this area as an opportunity.
Despite the dire news headlines of falling AACs, for contract loggers forecast reductions in AAC are not directly correlated to reduced work opportunity. The largest log consumer in this area is the Terrace-based sawmill owned by the ROC Holdings Ltd. ROC has invested significantly in the mill and it is typically operating on a one-shift basis with the potential to go to two should markets improve. The Kitwanga Lumber mill is currently owned by Morning Glory Farms in Hazelton who purchased the mill after the operation, run by Pacific BioEnergy Ltd., was placed into insolvency protection in 2011. The majority of the wood cut within the mill is cedar and it is operating on a one-shift basis. Most regional harvest not consumed by these two mills was exported from the region to either south coast pulp mills
As a final note, contractors should make themselves aware of the changes coming to the BC Interior allowable harvest as we collectively move into the post-beetle world. While the future AAC and the current harvest level may not be that far apart, some regions will experience greater declines than others and some contractors may feel the pain. Contractors should also be mindful of the type of tenure they typically operate on and be prepared to review their business plans should the AAC change in their area and on their tenure. You do not want to be the contractor that fails trying to chase the last stick of wood— after the beetle.
1 BC Interior Mountain Pine Beetle Report, www.woodmarkets.com/publication/ special-reports/pine-beetle-2010 2 Merritt Timber Supply Area (TSA) Timber Supply Analysis Public Discussion Paper, https://www.for.gov.bc.ca/hts/tsa/ tsa18/2015/18tspdp_2015.pdf 3 Wood Products Business Case Options For The Fort Nelson Area, http://www. northernrockies.ca/assets/Business/PDFs/ WoodProductsBusinessCase.pdf
Jim Girvan of MDT Ltd. and Murray Hall of Murray Hall Consulting Ltd. provide strategic fibre supply consulting and industry forecasts for clients in BC, western Canada and abroad.
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The Timber Harvesting Contract and Subcontract Regulation: Is it Addressing Its Intended Objective? TLA Editorial
Background
As part of the 2003 BC Forest Revitalization Act, a new rate dispute resolution mechanism was created as part of the Timber Harvesting Contract and Subcontract Regulation (Part 26.01 of the Regulation). Prior to 2003, arbitrators who sought to resolve rate disputes between contractors and licence holders under replaceable contracts (aka Bill 13 contracts) were guided by regulation that required a contractor who was “competitive by industry standards” to earn a “reasonable” profit. In this regard, contractors in arbitration had to prove that they were competitive in their operations by “market standards” and, if so, the regulation provided for a profit and risk allowance over and above the market competitive costs that a contractor could demonstrate in completing harvesting services. After several arbitrations where a tenure holder challenged the contractors’ efficiency or rates that they were asking for in the market place, most failed to demonstrate that the contractors were not competitive by market standards and contractors were awarded settle-
ments. In essence, the rate test worked. It included a market test for efficiency and contractors who chose to arbitrate demonstrated their efficiency and the rates required to do the work being asked of them and the courts agreed.
26.01 (1) of the current Regulation states: If a rate dispute is referred to arbitration, the arbitrator must determine the rate according to what a willing licence holder and a willing contractor acting reasonably and at arm’s length in
This fair market rate paradigm eliminated any relevance of the costs borne by a contractor to do the work they were contracted to do. The major licence holders then took the position that the notion of a “profit guarantee” under the Regulation was not consistent with the free market performance of the industry as a whole and sought changes to the Regulation. A new paradigm was subsequently engrained in the Regulation whereby rate disputes between parties to replaceable contracts would be settled by an arbitrator who would consider comparable rates agreed to by others doing similar work. More specifically the term “fair market rates” was introduced as the underlying theme of the regulation as seen in Part 26.01.
similar circumstances would agree is a fair market rate… This fair market rate paradigm eliminated any relevance of the costs borne by a contractor to do the work they were being contracted to do when setting rates and went so far as to eliminate any notion that contractors needed to be sustainable at all. The new regulation focuses on “comparable” rates and “lowest last bid” rates but unfortunately does not define a “fair market rate.” It does, however, provide the criteria that the arbitrator may consider in his determination including: (a) rates agreed to by the licence hold-
Fall 2015 Truck LoggerBC 31
er and contractor for prior timber harvesting services; (b) rates agreed to under another contract by either the licence holder or contractor for similar timber harvesting services;
(i) differences in operating conditions including, without limitation, differences in terrain, yarding distances, hauling distances, volume of timber per hectare; (ii) differences in the total amount of
The Regulation has resulted in other changes within the industry that have effectively undermined the intended application. (c) rates agreed to under another contract by either the licence holder, the contractor or another person for each phase or component of a similar timber harvesting operation; (d) rates agreed to by other persons for similar timber harvesting services; (e) if necessary to make meaningful comparisons to any of the rates agreed to in paragraphs (a), (b), (c) and (d) above, the impact on fair market rates likely to arise from differences between the timber harvesting operations that pertain to the rate in dispute, and the timber harvesting operations that pertain to any rate described in paragraphs (a), (b), (c) and (d), including the following:
timber processed; (iii) differences in the required equipment configuration; (iv) differences in required phases; (v) differences in operating specifications; (vi) differences in law; (vii) differences in contractual obligations; (viii) differences in the underlying costs of timber harvesting operations in the forest industry generally which would affect fair market rates, including changes in the cost of labour, fuel, parts and supplies; (ix) differences in the cost of moving to a new operating area, if any;
(f) any other similar data or criteria that the arbitrator considers relevant. Two additional clauses in the Regulation provide some comfort to contractors who face arbitration knowing that the new market rate paradigm would be used as the basis of arbitration. Section 25.1 of the Regulation requires: that at the request of a mediator or arbitrator, each party to a rate dispute must do all of the following: (a) disclose all rates known to it and described in section 26.01 (2) (a), (b), (c) and (d); (b) disclose any relevant information known to it that, having regard to the considerations in section 26.01 (2) (e), may be reasonably necessary to make meaningful comparisons between those rates disclosed under paragraph (a) and the rate that is subject to the rate dispute; (c) not disclose to any third party any confidential information received under paragraph (a) or (b); (d) not use any information received under paragraph (a) or (b) for any purpose other than the rate dispute. This section of the Regulation notionally allows contractors involved in
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the rate dispute to solicit and obtain rates paid to other contractors for similar work that they could then use in the arbitration.
tended application of the Regulation to the general detriment of contractors. Most notably is the general inclusion in all logging contracts of a confi-
In effect, the entire contractor segment of the forest products supply chain has been undermined.
confidentiality clauses. In essence, contractors no longer have any fundamental data with which to demonstrate “market comparability.” At the same time, their costs, desired rate or specific circumstances have no bearing on the discussion. All that is typically considered is “industry average data” which no contractors would have. Conversely, each licensee has the privilege of knowing what each of their contractors are willing to operate for—a clear advantage in negotiations bestowed upon them by the Regulations. As a result, the regulation has effectively undermined any notion of contractor sustainability. Under this regime, the efficient contractors are at risk since they are systematically being forced to accept lower and lower “market rates” based upon the lowest last bid. In effect, the entire contractor segment of the forest products supply chain has been undermined. What has been the effect of these actions? Very simply, rates have stagnated and in some cases fallen since the only credible rates that a contractor can bring to the table to justify a fair market rate
Section 25.5 (c) allows for the use of peers (i.e. other contractors) to provide perspective and assist the mediator in their deliberation of the rates being arbitrated. At the request of a mediator or arbitrator, each party to a rate dispute must do all of the following: if requested by the mediator, or if agreed to by the parties, each party must appoint one peer to assist the mediator during the mediation process.
Effects
dentiality clause preventing individual contractors from disclosing their rates to others. This clause effectively mitigates contractor’s potential to use either peers or comparable market rates since divulging of the rates to one another would contravene the contracts signed by each. What this means is that as a result of the widespread use of contractor confidentiality clauses in replaceable logging contractors across BC, all but two of the criteria that the arbitrator may consider in his determination are available to contractors, those being: (a) rates agreed to by the licence holder and contractor for prior timber harvesting services, and (f) any other similar data or criteria that the arbitrator considers relevant, since every other criteria requires knowledge of rates prohibited by
Since implementation of the current Regulation, there have been no arbitrations brought to completion. The Regulation has, however, resulted in other changes within the industry that have effectively undermined the in-
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Since implementation of the current Regulation, there have been no arbitrations brought to completion. are rates previously agreed to with the licensee. Ironically, it is these very rates that lead to arbitration. For the licence holders, the benefits of the Regulation have been many. Beyond the obvious (no completed arbitrations since the new regulations took effect and stagnated rates for harvesting services), the term “standard industry rate” has evolved which exemplifies the essence of the market rate test…that no one contractor should be paid more than the next contractor for the work they do regardless of their efficiency of operations or difficulty of work. This is despite the fact that the Regulation itself contains provisions to allow for the adjustment of comparable market rates in order to “make meaningful comparisons to the rate dispute in question”. Further, it is generally recognized that “market rates” set the bar for all contractors whether they hold replaceable contractors or not. In essence, rates for harvesting services across BC are no longer negotiated, but rather, they are determined by the licence holder alone based on their perspectives on what a “fair market” reflects without ever considering the differences in conditions or contractor efficiencies required to make meaningful comparisons to any of the
34 Truck LoggerBC Fall 2015
rates agreed to. And all of this is engrained in Regulation. The impacts are clear in the market place. The contractor community has been undermined through application of the new regulation by the majors. The evidence is seen in ongoing contractor insolvencies that have resulted in many small community businesses paying the price for low rates, exits from the industry of many otherwise well capitalized and market competitive contractors, sales of logging equipment at auction as contractors downsize and an ongoing difficulty in attracting new workers to the logging sector. The lumber supply chain is now at risk as a result of a lack of contractor sustainability resulting from the imposition of a flawed and unworkable market rate test within Bill 13.
Solution
For its part, the TLA has embarked on a number of initiatives working together with financial analysts, investors and industry associations to find solutions to the underlying rate versus cost and efficiency issues. Given that this Regulation is now ten years old, and times have changed, it would be prudent to conduct a review of the Regulation as well.
What is needed, however, is an empirical database of contractor costs and efficiencies that can be used to demonstrate the dilemma. With the data in hand, an update of the market rate test and related sections within the Timber Harvesting Contract and Subcontract Regulation would then be proposed that reflects the reality of the business today. The reality being that the current regulation ignores contractor sustainability to the detriment of the industry as a whole. This update may eventually extend to a review of the legality of placing confidentiality restrictions within harvesting contracts as an act of bad faith on the part of the licensees as it relates to rate negotiations and the market rate test within the Regulation. If you are interested in participating in an initiative to update the Timber Harvesting Contract and Subcontract Regulation so that the rate dispute mechanism reflects what was intended and, if needed, reviewing the legality of placing confidentiality restrictions within harvesting contracts, please contact David Elstone, TLA Executive Director, at david@tla.ca or 604.684.4291 ext. 1.
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David & Goliath Need Each Other: Supply Chain Management in BC’s Forest Industry Robin Brunet
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o to any natural resource conference in the world, and chances are most of the symposiums will include indepth discussion about supply chains and the importance of their management. Supply Chain Management (SCM) is taught in business schools, preached by business leaders, and widely viewed as the factor that can either drive margin growth or wreck business value, depending on how it’s undertaken. And many in the forestry sector agree that on the BC coast, there are key elements sorely lacking in this region’s SCM. “The most obvious manifestation is the ongoing problem of contractor returns not being enough to sustain their businesses. How to make this segment of the industry attractive is a problem when there is not nearly enough people entering our industry to handle upcoming market opportunities or the wave of retirements anticipated over the coming years,” says David Elstone, RPF and Executive Director of The Truck Loggers Association, adding that supply chain challenges of the coastal BC industry in-
clude the ever-present need to keep a lid on delivered log costs, and also to recognize value in service provided. Elstone points out that, “Other forestry producers such as New Zealand are making tremendous advances in innovation to increase productivity and safety. We’ve experienced some improvements, but we have really yet to turn the corner on reaching a collaborative supply chain. The potential upside is exciting.” The good news, according to academia, is the commonality of SCM problems across many industries and examples of companies using SCM to differentiate themselves from the competition. “Automobile manufacturing and retail vastly improved because they developed good SCM practices,” says Dr. Taraneh Sowlati, a professor at the University of British Columbia’s Faculty of Forestry. “So I’m very optimistic that the coastal forestry sector can improve too.” When asked to cite the practices that have helped other industries, Sowlati
without hesitation replies, “Co-operation and sharing of information. SCM is often extremely complicated and demanding, but it’s safe to say that without co-operation between all participants in the chain, good management—not to mention sustainability—it can’t happen.” Dr. Garland Chow, Associate Professor, Logistics and Supply Chain Management for Sauder School of Business, calls collaboration “the pinnacle” of successful supply chain partnerships. “It’s more than coordination and cooperation,” he says. “It’s recognizing that the contribution of all the participants in the supply chain are valuable, and this results in more joint decision-making, for example between the logging contractors and the forestry firms.” In simple terms, a supply chain starts with the supply of raw materials and ends with the customer. “In a typical supply chain, some companies produce raw materials that are used by other companies to make components,” says Chow. “In turn, these components are purchased by other manufacturers to
Fall 2015 Truck LoggerBC 37
Photo: TLA Staff
produce finished products, which may be purchased by wholesalers and other middlemen or go directly to retailers.” Supply chain management began in the 1970s in shipping and receiving and has evolved from a technical and logistical function to a more strategic approach; it has been finely-tuned by Dow, Dupont, IBM, Proctor and Gam-
ble, and other corporate giants to help compete in the global marketplace. But even smaller firms scrutinize their supply chains in forensic detail, considering that supply chain-related costs represent between 55 percent and 65 percent of a company’s gross revenues. In his paper “The Role of Supply Chain Management in the Wise Use of
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ings and product quality. He also argued that close co-operation between wood supply and mill personnel can help determine positive and negative impacts throughout the supply chain, resulting in financial benefits to suppliers and downstream processors. During the 2011 Impact Innovation seminar hosted by Alberta Innovates
Bio Solutions, Dr. Ken Higginbotham, then Canfor’s vice-president for forestry and the environment, stated that despite technological innovation vastly benefitting the forestry sector, “introducing and adopting innovative business management systems has perhaps influenced industry innovation even more recently than science and technology.”
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That argument was reiterated by SCM specialist Joe Brady, who, in an April 2013 post on the Supply Chain Edge consultancy website, outlined the main SCM problems facing companies today. These problems include unrealistic assumptions that supply chain management technologies will fix everything; overreliance on past performance to predict future sales; and lack of under-
standing of the full capabilities of suppliers and service partners. In explaining the latter problem (albeit from a corporate perspective), Brady alluded to some of the difficulties facing BC coastal contractors: ‘In most companies today, suppliers are key extensions of the business model and play an important role in enabling companies to meet customer demands. That’s why it’s
critical for companies to know the full range of capabilities and offerings suppliers can bring to the table, as well as any shortcomings among suppliers that could disrupt the business.’ The many effective SCM techniques notwithstanding (from the timely sharing of vital demand information to vendor managed inventory and collaborative planning), fixing the BC coastal
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forestry supply chain may well have to begin at a more fundamental level. “For our supply chain to work it needs a healthy contractor base, and although I’m not against a hard bargain by any means, we need fairness in contract negotiations,” says Elstone. Is this happening to any meaningful degree? Adam Wunderlich, managing partner in Fall River Logging (a stumpto-dump operation that harvests 300,000 metres annually for TimberWest and Western Forest Products), says, “I’m starting to see hints of it. We recently engaged with TimberWest to brainstorm opportunities to improve efficiencies, reduce costs and find innovative ways to address some of our challenges.” Sig Kemmler, co-owner of Alternative Forest Operations Ltd., which earlier this year auctioned $2 million worth of equipment and slashed its 50-member workforce due to losing $500,000 in a contract with a major firm, says while good relationships are imperative to the coastal industry, contractors have to reassess the way they do business too: “Frankly, neither I nor my two partners think it makes sense to have the capital invested in doing what we’re doing. We switched to renting equipment, and right now we’re achieving some of our best-ever performances.” Kemmler describes his relationships with Western Forest Products, Island Timberlands, Teal Jones, and other firms as “uniformly great. Attitudes have improved significantly. We don’t always get what we want, but the companies have been flexible in return, and at times we can charge retroactively.” However, in discussing the contracting community, Kemmler remarks, “Striving for the lowest price doesn’t bode well. I think ultimately there will be fewer contractors in the future.” Fourth generation logger Jacqui Beban, Vice-President at Nootka Sound Timber Co. Ltd., enjoys an unusually good relationship with Western Forest Products and harvests about 230,000 metres annually. “Under our agreement, which is in its fifth year, we’re responsible for many aspects of the supply chain, including determining target markets,” she says. “When we engineer a block, we know exactly when the wood will hit the market and what equipment we’ll use. We also sell the logs.” Although this is a unique case of coop-
eration between a contractor and forest company, in principle it’s another example of the ability of both parties to reach a mutually beneficial contract agreement. Taraneh Sowlati warns that communication and cooperation “doesn’t mean you automatically get benefits or profits, but these are foundations that must be established. How businesses relate to one another in a supply chain is crucial in a global marketplace.” David Elstone puts it another way. “The relationships that underlie coastal log supply are at risk unless we can break the pattern of heading to mediation and/
or arbitration each time a disagreement occurs. We need leadership instead, and the history of other industries suggests that this shift is entirely possible. “Our cultural mindset can shift, and it’s happening slowly. We welcome any suggestions about how the process can be accelerated. The message I’m getting from contractors is they want respectful and fair business relationships, not confrontation, so let’s see how we can build on this.” Wunderlich points out that the coast is a challenging place to operate. “Fluctuating market conditions, challenging
Fall 2015 Truck LoggerBC 41
Photo: iStock
terrain, diverse stand types, remote operating areas, and union constraints— among many other things—all have a significant impact on the efficiency and reliability of the supply chain. “But I’m optimistic that discussions like the ones we’ve begun to have with TimberWest—and actions that result from them—pave the way for on-going
collaboration, trust, respect and understanding between businesses. This ultimately will greatly assist in creating and maintaining a robust, durable and globally competitive supply chain on the coast. I hope the highest levels within the industry recognize this and, if not already doing so, actively encourage their companies to engage with their supply
chains. I’m confident that doing so will provide excellent return on investment.” Beban concludes, “Sometimes I can be very pessimistic about the problems facing our supply chain, but we’ve got a good industry at the core, and our people very much want to remain in it. A lot of other industries can’t make the same claim.”
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New Forestry Leaders Susan Yurkovich: Coming Home to the Forest Industry Based on your experience from outside the industry, how do you view BC’s forestry supply chain? I know the relationships between the harvesting and manufacturing sectors have had some challenges. But I also know that when we work together toward a common goal the whole industry benefits. I’m going to take some time in the coming months to look at those relationships and see what can be done to work productively together, company to company and association to association.
T
he Council of Forest Industries is a trade association representing forest companies operating in communities throughout the Interior of the province of British Columbia. What attracted you to this role and what do you bring to it? Joining COFI feels like coming home for me. I spent twelve years previously working in the forest industry, ten of those years with Canfor where I was a vice-president until 2004. For the last nine years I’ve been working with BC Hydro, where I led the Site C hydro-electric project through the development phase, regulatory and financial approval to start of construction. Over the twenty plus years I’ve spent working in senior executive roles in resource industries, I’ve learned a lot about developing resources in our province. I look forward to bringing those skills and experiences back to the forest sector and to working with the provincial government and our members on the challenges and opportunities facing the industry today.
44 Truck LoggerBC Fall 2015
The BC government is working hard on a Competitiveness Agenda for the forest industry. How do you see your organization being a part of that strategy? COFI works with all three levels of government on a regular basis. Competitiveness is one—if not the—most important issue we deal with. BC’s forest industry has historically enjoyed a competitive advantage in the global marketplace. I want to see that continue. There are three things we need to maintain our competitive advantage: fibre security and operating certainty on the land base; competitive cost structures that foster investment; and policies that support free and open market access. Forestry is an important part of the backbone of BC’s economy and contributes to the strength and stability of many communities around our province. I believe Premier Clark and her government recognize this and are doing many of the right things to keep the industry competitive on the world stage. I look forward to working with the provincial government and our members to ensure the competitiveness agenda remains top of mind. What are the top three things you’d change in BC’s forest industry? I’m not sure change is the right term. There are a lot of good things going on in the industry today. What I’d like to do is see a continued focus from Victoria on creating a policy environment that leads to a safe, sustainable
and competitive forest industry. As an industry, I think we need to be putting effort into workforce recruitment and retention. We’re the greenest resource industry, we have a really good story to tell, and we need to reach out to new as well as traditional demographics to tell that story and remind people why this industry is so great to work in. And finally, as an organization, I think COFI needs to continue the work we are doing with government, First Nations, our members and other partners on creating the conditions that support sustainable communities. What’s your message for BC’s forest contractors? As I said before, we need to work together as licensees and contractors for our mutual benefit. I think our common challenge and our common goal in the coming years will be finding ways to make the industry more competitive, while at the same time ensuring our contractors share in the benefits of a more stable and sustainable industry. Where do you see BC’s forest industry going over the next three years? In the Interior, which is where COFI’s members primarily operate, we’ve just come through the largest salvage operation in the history of this province. The mountain pine beetle has transformed the industry—from the way we harvest and truck, to manufacturing processes, to safety, not to mention the profound impacts it’s had on fibre supply. But I have to say, I think the industry has come through the disaster in pretty good shape, all things considered. We have an industry that’s learned to be nimble and innovative, that’s diversified its product base and its markets, and that will continue to do so. Will it be business as usual? No. But the forest industry in this province has always been the economic engine that could. I wouldn’t be here if I didn’t think this industry had a bright future ahead.
Jeffery Zweig: Back In Canada and Leading Forestry my previous role, I had global responsibilities with operations in many different countries. I can say unequivocally, British Columbia ranks as one of the best places in the world to live and work.
T
imberWest is Western Canada’s largest private timberland company with 325,400 hectares / 804,200 acres on Vancouver Island. What attracted you to this role and what do you bring to it? There were a few aspects about the opportunity at TimberWest that really set it apart. Firstly, I was immediately impressed with the capability and depth of the several thousand people who work with and for TimberWest. The company has been operating in British Columbia for over a century. The employees and contractors at TimberWest are part of the fabric of the community and many of the families have been involved in forestry for generations. This sense of tradition underpins a set of values and organizational culture that is quite unique. It was a privilege to be asked to join the family and lead the company forward. Secondly, the core of any timber company is its land position and TimberWest has a great forest endowment. With over 90 per cent of the production from second growth, there is a clear focus on sustainability and renewal that has been passed down over decades. Finally, the ownership of TimberWest by the BC provincial employee pension plan (bcIMC) and the Federal employee pension plan (PSPIB) is a clear advantage. As a result, we have very broad Canadian ownership. Importantly, our owners’ long-term investment horizon is aligned with the nature of the 50+ year growing cycles of our business. From a personal perspective, I am very pleased to be back in Canada. In
Based on your experience from outside the industry, how do you view BC’s forestry supply chain? My first observation relates to safety. While there has been significant improvement over the last several years, far too many people get injured every year. We can and must do a lot better. The singular objective is that every person gets home safely every day. Regarding the BC forestry supply chain, this is an area of significant opportunity. The level of integration is relatively low within and between companies. The equipment is often dated and inefficient relative to the state of the art. Overall, our productivity is modest compared to best practice. Having worked in operations across a variety of commodities, I can say unequivocally that we have a lot of scope to improve. On the global cost curve, BC is a high cost producer. Given that the majority of BC wood products are exported in one form or another (logs, lumber, plywood, paper, etc…), we need to take a major step up in productivity or risk becoming permanently uncompetitive. To achieve this requires a combination of a motivated, skilled workforce; an appropriate regulatory environment; and the right investment in equipment, technology, and infrastructure. In a world where investment capital is highly mobile, we need to be able to demonstrate attractive returns. With the quality and scope of the working forests in BC, there is an excellent foundation. This is necessary, but not sufficient on its own to ensure our future success. We all have a role to play in ensuring that BC remains competitive going forward. The BC government is working hard on a Competitiveness Agenda for the forest industry. How do you see your organization being a part of that strategy?
Business, labour and government all have a role to play in making BC more competitive. I applaud the provincial government for taking the initiative. We are highly supportive and are working with government and our industry peers to provide input on a number of levels. What are the top three things you’d change in BC’s forest industry? 1. Improve safety: Zero fatalities, zero serious injuries must be the goal. 2. Eliminate log export restrictions: The current export process negatively impacts the international competitiveness of the BC forest sector, and is a significant issue with our key trading partners (US, Japan, China, etc.). 3. Remove regulatory barriers to innovation: Permit the deployment of new technologies and equipment (e.g., more efficient truck configurations, scanner scaling, etc.). What’s your message for BC’s forest contractors? We see a major opportunity to work with the contractors to dramatically improve safety and productivity. On safety, “zero fatalities, zero serious injuries” is possible. It’s cultural. When it comes to safety, we are what we tolerate. We need to move from compliance to true commitment. On productivity, there are major gains to be had by standardizing on the right equipment, and making smart investments in technology and infrastructure. In other places in the world, there have been major advances that are not yet deployed in BC. The prize is more saleable wood at lower unit cost from the same timberland, with the benefits to be enjoyed across the sector. However, it will require new ways of working together and a higher degree of coordination up and down the supply chain. We have started working with our contractor partners on a model that provides the appropriate support, incentives and risk-sharing to achieve this objective. The future is bright. There is a clear opportunity to substantially improve the overall competitiveness of the sector.
Fall 2015 Truck LoggerBC 45
WORKING Together: Tourism, First Nations and Forestry
By Brenda Martin
A
t the mouth of Orford River, the brilliant hue of glacier-fed, turquoise coloured fresh water contrasts with darker sea water of Bute Inlet. But the mixing of the fresh and salt waters are not the only contrasting thing at Orford these days. There is also an unlikely triad working together—forestry, First Nations and tourism. Now, First Nations working in forestry is not unusual these days. And neither is First Nations working in tourism. But forestry and tourism are still unfamiliar partners. That said there’s a new age dawning in Campbell River and indeed along the coast between BC’s two most famous industries. Back in 2011, the Homalco First Nation, led by then Chief Richard Harry, was in the process of treaty negotiations
Photo: Nik West Photography, Courtesy of Interfor
46 Truck LoggerBC Fall 2015
and was looking to the future. With tenure negotiations underway, they decided it was a good time to start a forestry program and bought a logging company, now called Homalco Forestry LP, based out of Campbell River. Today Homalco Forestry, a TLA member company, has 20-25 employees and is in its fourth year of harvesting 175,000 m3 per year on Interfor and TimberWest tenure. Originally, the Homalco planned to harvest on their own tenure but treaty negotiations have been slower than planned. “We hadn’t intended to compete with other logging contractors in the Campbell River area but we have managed to stay afloat without having our own Homalco tenure,” said Gordie Atkinson, General Manager for Homalco Forestry. In the long term,
Atkinson says, “We’d like to manage a fair share of the Homalco traditional territory and also harvest timber for Interfor and TimberWest.” One of the few 100 per cent bandowned companies, Homalco Forestry is also working hard to build up its First Nations workforce. Derek Ferguson, Woods Foreman for Homalco Forestry and Metis himself, is proud to say that 50 per cent of the workforce is First Nations. “I usually mentor people I think have promise and then get them to shadow another First Nations or Metis employee,” said Ferguson. “I believe it’s part of my job to build capacity within the Homalco First Nation.” “From my point of view it is happening very fast,” said Atkinson. “I never would have thought we’d have half First
would hang up at the 6 km mark so tour buses could get up the road and the turn at 5.5 km.” They also bought another vehicle so they could shuttle tourists away to a safe viewing point when the log dump was in use. But the key was talking to the tour providers and guides and making sure they knew about the sustainable forestry practices being used. Tour guides also informed tourists that while new cutblocks can be unappealing, they’d point out one year, two year and five-yearold cutblocks on the way up to Orford so tourists would know that it is just a matter of time before a cutblock greens up. “The key is to de-emphasize and explain,” said O’Connor. “We didn’t have one complaint. In fact, some tourists thought it was cool.” “There was discussion with the tourists at Orford River,” said Atkinson. The displays at the new presentation centre explained the Homalco’s sustainable resource development and got the conversation started. “Most of the tourists are interested in how we manage our resources—especially the Europeans,” said Atkinson. “They ask how we replant and what the size of the cutblocks are—the whole bundle. Europeans have been having these conversations for a long time.” “Forestry at the end of the day is about relationships,” said Rhiannon Poupard, Manager of First Nations & Forestry
Partnerships with Interfor. There are a lot of people involved in the Orford forestry operation. Interfor has the tenure and does the planning. They’ve signed a memorandum of understanding with Homalco First Nation because the tenure is within the Homalco’s traditional territory. Ponting Logging & Grade, another TLA member, is the road building contractor and Homalco Forestry is harvesting the trees. “Success on the ground means good relationships with all parties,” said Poupard. Mark Ponting agrees. “Over the last 11 years, we’ve built most of the road in this area. We value the good working relationship we have with the Homalco First Nations, Homalco Forestry and Interfor.” And further demonstrating the cross-over of the two, once juxtaposed industries, Ponting is also part owner of Coastal Water Taxi & Transport—a company that brings tourists up to Orford for bear tours. So he’s a stakeholder in both industries. Looking at it from a wholistic angle, Shawn O’Connor is even more pragmatic. “The bottom line was there were a lot of bears in 2014 because three sets of triplets were born at Orford that spring.” In other words, when the estuary is swarming with bears contentedly eating salmon, tourists are less likely to assume logging is negatively affecting wildlife. “A few years earlier there were no cubs,” said O’Connor. “That year there Photo: TLA Staff
Nations employment in four years.” And he acknowledges that logging is hard work. “It’s not for everybody. Camp life can be isolating and the days are long— up at 4 am and not back until 6 pm.” Another business arm of the Homalco First Nation has run grizzly bear tours at Orford for 20 odd years. Every year the bears come down to the river estuary to feed on the salmon returning to spawn. While they are focused on filling their bellies with salmon, it’s easy to watch the bears in their natural element from one of the Homalco’s four bear viewing towers. In 2008 Homalco Wildlife Tours Inc. reorganized the business and trimmed overhead costs. “We used the 80/20 rule,” said Shawn O’Connor, Economic Development Officer and General Manager of Orford River Operations. “80 per cent of the business was coming from 20 per cent of the customers so we focused on them.” They also focused on infrastructure—building a presentation centre and two more bear viewing towers—and the professional development of their guides. The business continued to grow. Then, in the summer of 2014, the inevitable happened. The two Homalco businesses overlapped. Homalco Forestry would be harvesting in Orford while Homalco Wildlife Tours ran their bear tours. Were people worried? “Logging and tourism? I embraced it,” said Atkinson. “We like to show off our natural resource planning.” The Homalco already attend tourism/ forestry meetings hosted by the provincial government in Campbell River. “The kayakers and the fishing tour people attend as well,” said Atkinson. “These are the other people who use the Discovery Islands and Bute Inlet for their businesses.” The group has worked hard to work together rather than get bogged down in their own needs. “It’s easy to get singleminded about managing for your own resource—be it tourism, fishing or forestry. I think that’s where the Homalco can offer a fresh perspective. They manage many resources—hydro, forestry, wilderness tours and a fish hatchery and this gives us a broader perspective.” O’Connor also explains that an action plan was created to help things go smoothly. “We developed a protocol for driving on the roads—logging trucks
Drew Blaney is one of the Homalco youth cultural tour guides. His grandpa was born at Orford 79 years ago when the Homalco still had a village there. Fall 2015 Truck LoggerBC 47
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was a very small amount of logging going on compared to last year but people blamed the logging for the lack of bears. I tracked the days of the logging and the days the bears were in the estuary and there was no correlation.” The problem was there were very few fish in the river that year and there are other foods for bears to eat in the forests. “They only come down to the river for the fish,” said O’Connor. “No fish, no bears.” Sonora Resort, located on Sonora Island not far from Orford River, is rated by Forbes as one of the ten top, upscale, all-inclusive resorts. It offers guests a five star experience in an area surrounded by young second growth forests and wildlife. “For the most part, we don’t get a lot of comment about the logging,” said Sean Ross, General Manager of Sonora Resort. “That’s one of the good things about working hand-in-hand with the forest companies. That desire to work toward that goal of taking trees out while still maintaining those great visual viewpoints for the guests.” Ross understands that both tourism and harvesting trees are big players in BC’s provincial economy. “Forestry feeds a lot of families. I think when forest companies and tourism companies have open and honest dialogue with each other—they’re completely transparent—great things can be done.” And great things continue to happen at Orford. This year Homalco Wildlife Tours Inc. offered cultural tours in June, July and early August. While cultural tours were offered to extend the tour season—bears are only in the estuary from mid-August to late October—the mission statement was to “turn culture into cool in the eyes of the Homalco youth,” said O’Connor. “It’s been a wonderful thing and a big success.” The new Chief, Mary-Ann Enevoldsen has worked hard to bring back Homalco Culture to all band members. A call was made for Homalco youth who had completed grade 12. The selected youth completed a two week cultural boot camp where they learned about cedar bark weaving and stripping, traditional dances and the Homalco language. “The group also went to Haida Gwaii to meet the Chief and Elders there and to see how the Haida are doing cultural tourism,” explained O’Connor. A cultural tour includes a traditional greeting from the Homalco youth tour
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Cheyanne Hackett, also a Homalco youth cultural tour guide, wears a button blanket made for her by her grandma when she was five years old. Her grandma has since passed away but Cheyanne believes her grandma knew she would need it. these days—all of it good. The forest resource and tourism industries are operating in conjunction with one another, in plain view. Mark Ponting confirms that this forestry/tourism partnership is long term. “This year we’re building road and harvesting near South Gate at the top of Bute Inlet. But we’ll be back at Orford next spring.” And so will the bears, the tourists and the Homalco youth.
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guides and a chance to paddle a traditional canoe across the estuary to see pictographs made by the Homalco who lived at Orford thousands of years ago. Everyone also gets to weave their own cedar bracelet and take a turn in the wildlife viewing towers to see early bears and the other wildlife that lives in the estuary. The tour ends with a salmon and crab feast and traditional dances performed by the guides. There’s much happening in Orford
Fall 2015 Truck LoggerBC 49
Understanding the Impact of Bill C-45 on Logging Contractors
By Stephen Ross and Eric Ito
L
ogging can be a hazardous industry making safety a paramount priority. Occupational health and safety legislation provides safety standards and sanctions for their breach. Bill C-45 goes further by amending the Criminal Code to create a legal duty on everyone who undertakes, or has the authority, to direct how another person does work to take reasonable steps to prevent bodily harm to any person arising from that work or task. A breach of that duty can
result in criminal charges against supervisors, employees, and the company itself—including senior management and its board of directors. Logging contractors should be aware of the implications of Bill C-45, which resulted from the 1992 Westray coal mining disaster in Nova Scotia that claimed the lives of 26 miners. It affects their contracts, and their relationships, with both licence holders and subcontractors. Licence holders have ramped up the contractual safety obligations they impose on contractors, resulting in increased costs, paperwork and occasionally duplication of safety measures. At the same time, contractors must ensure that they comply with their legal duty under Bill C-45 in the direction of the operations of their subcontractors.
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www.campbellriver.ca 50 Truck LoggerBC Fall 2015
There is some concern that the independent contractor status of logging contractors is being undermined by excessive direction and supervision of their operations by licence holders. In theory, contractual provisions intended to meet the standard of safety required by Bill C-45 will not have that effect, any more than do provisions found in every contract that require contractors to comply with other legislation affecting their operations. Their independence is not compromised by reasonable contractual provisions that require their operations to be carried out safely. That said, of greater concern is unnecessary or redundant duplication of safety measures, such as the imposition of the licence holder’s entire safety program on a contractor who is already SAFE certified, has its own comprehensive safety program and is complying with all applicable occupational health & safety legislation. Consideration must also be given to the policies and requirements of WorkSafeBC and the BC Forest Safety Council that have increased the diligent application of safe practices in the industry. Within this context, consultation between licence holders and contractors regarding reasonable safety practices and processes which implement effective workplace health and safety programs should avoid such duplication and its costs. However, licence holders must accept that the industry costs of enhanced safety practices will impact logging rates, as provided by the rate setting provisions of the Timber Harvesting Contract and Subcontract Regulation. The other question is what should contractors do to ensure they comply with their legal duty under Bill C-45 in directing the operations of subcontractors. The Criminal Code requires them to take “reasonable steps” to ensure the safety of workers and the public. Criminal liability can only result from “wanton or reckless disregard.” In discussing Bill C-45 in parliament, the government stated that “the criminal law must be reserved for the most serious cases, those
Photo: iStock
that involve grave moral faults.” In the 11 years since Bill C-45 was introduced, there have only been 10 prosecutions brought under it. None of those prosecutions arose from incidents in the forestry industry. Of those charged in other industries, six have been against individuals and three of them resulted in conviction. The remaining four prosecutions have been against companies, two of which resulted in conviction. Why so few? There are several explanations. One reason is that the threshold the Crown must meet for a conviction is high. A mistake or carelessness on the part of an individual is not enough. In order to be convicted of criminal negligence, the defendant must have shown “wanton or reckless disregard.” Another reason is that the framework for enforcing workplace safety already exists through provincial occupational health and safety laws. Not only are those laws more specific to safety obligations, the standard under the Criminal Code of “wanton or reckless disregard” is not required in order to violate those laws. In addition, inspection officers and other members of workers’ compensation boards are experts in workplace safety, and when an incident occurs, police and Crown prosecutors may be more comfortable deferring the matter to occupational health and safety officers. Finally, Bill C-45 is likely to be applied to serious incidents involving moral fault. The March 2006 sinking of the Queen of the North in BC where two passengers were killed, and the 2009 Metron Construction accident resulting in the deaths of four workers in Toronto, are examples of successful prosecutions resulting in Bill C-45 convictions. While less serious incidents have led to charges under Bill C-45, 9 of the 10 prosecutions to date concerned incidents involving workplace fatalities. It is not yet clear whether the introduction of Bill C-45 has resulted in an improvement in worker safety in BC. Between 2004 and 2013, the number of all workplace fatalities in BC remained relatively constant at an average of approxi-
mately 146 workplace deaths per year. However, Bill C-45 is the law. Logging contractors must be aware of the legal duty it imposes on them. They must comply with that duty by assessing the hazards that exist in their workplace, implementing effective health and safety measures and informing their work force of those risks and hazards and providing appropriate training and protective equipment to them.
Stephen Ross is a Partner and Eric Ito is an Associate at Miller Thomson LLP and both work out of their Vancouver office. Stephen’s practice is concentrated in the areas of commercial litigation, forestry law, and insolvency law. Eric’s is concentrated in the areas of labour and employment law, commercial litigation, immigration. Respectively, they can be reached at 604.643.1205 or sross@ millerthomson.com and 604.643.1228 or eito@millerthomson.com.
Fall 2015 Truck LoggerBC 51
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A Great Day: Golf Tournament and Barn Dance! he TLA 19th annual golf tournament was a fun-filled day full of golf, networking and prizes. The sun shone and the Crown Isle golf course was at its best. As always, TLA members enjoyed the great forestry history Crown Isle displays throughout the venue. In response to the positive feedback on our first barn dance, we threw one again this year with the idea that members could use it as a an opportunity to treat employees and spouses to a night out. We had a full dance floor and a crowded tent all night—it was a rousing success! We’ll be back at Crown Isle again next year for our 20th annual members’ tournament! Crown Isle, a TLA member itself, always makes us welcome and is a gracious host. Their staff go over and above the call of duty to make sure our
tournament is a success. Thank you! If you weren’t able to get a foursome registered this year, we hope to see you in June 2016! This year at the tournament we raised $2,442.50 for the TLA Forestry Education Fund which included $1,720.25 raised at the Nootka Sound Timber shooter bar and $710 raised by MNP and RBC at their chip-into-themug challenge and $120.25 raised by Fountain Tire. We had a tight finish at the tournament this year. The Aggressive Timber Falling team—Ted Beutler, Shannon Cupper, Trevor Torgerson and Nick White—came in as a close second to the winning team from Mike Hamilton Logging, pictured right. Finally, thank you to all our generous sponsors.
Photo: TLA Staff
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56 Truck LoggerBC Fall 2015